The 5 Biggest Blockchain Issues That Are Yet To Be Resolved
Blockchain is a game-changing technology, and it is in many respects. However, many evangelists would have you believe that it is the remedy for all of the world’s problems. Here’s a rundown of some of the blockchain issues that anyone considering adopting it should be aware of. Let’s start with the most important.
1. There is an environmental cost to the blockchain
Blockchain offers security and achieves consensus over a dispersed network. It does, at least in the manner, it is used today. Blockchain relies on encryption. This essentially means that complicated algorithms must be executed in order to “prove” that a user has the authorization to write to the chain, which requires a lot of processing power. This, of course, comes at a price. Using the most well-known and extensively utilized blockchain, Bitcoin, as an example, it was reported last year that the computing power required to keep the network running consumes the same amount of energy as 159 of the world’s countries.
Yes, because Bitcoin’s blockchain is such a valuable network – with a current market valuation of over $170 billion at the time of writing – sophisticated and computationally intensive security is required. Smaller blockchains, such as those used internally by a company to securely monitor and record business activity would use a fraction of that amount. Nonetheless, it’s a significant factor to consider, and the environmental consequences and energy expenses must not be overlooked.
#IOTA is a non-inflationary #currency in that there is a fixed amount of #tokens in circulation and the #protocol doesn’t algorithmically create additional supply. It also solves the fundamental shortcomings of #blockchain: scalability, environmental sustainability and cost. pic.twitter.com/a1t9P25iNz
— Dutch (@wiredutch) July 28, 2021
2. A dangerous environment is created by a lack of control
Legislators have mostly failed to keep up with innovators (or scammers) in recent years. This is primarily an issue with Bitcoin and other value-based blockchain networks. However, many people who have recently begun investing in Bitcoin or other cryptocurrencies have discovered their cost. It is a highly volatile market. Scams and market manipulation are frequent due to a lack of governmental control. Onecoin, which was recently exposed as a Ponzi scheme and is thought to have defrauded millions of investors who thought they were getting in on the “next Bitcoin,” is one of the high-profile incidents. This results in rich pickings for those looking to profit from “FOMO” — the “fear of missing out.”
Even if you stick to the relatively established coins like Bitcoin, Litecoin, or Ether as a speculative investor in cryptocurrencies, there is always the risk that the exchange or online wallet where you keep your coins will be hacked, shut down by governments due to shady practices, or abscond with your coins. Again, this is a result of the industry’s lack of regulatory control, causing a significant blockchain issue.
3. Because of its intricacy, end-users have a hard time appreciating the benefits
Although its potentially revolutionary applications are apparent once one understands the principles of encryption and distributed ledger that underpins blockchain, it takes time and a lot of reading before the “man on the street” understands what makes blockchains so helpful. The middleman services offered by the financial services industry, such as clearing payments and fraud protection, are being discussed by tech pundits. However, many people believe that banks provide this service adequately and at a low cost to the end customer.
It’s no surprise that the first blockchain, Bitcoin, made headlines just after the 2008 financial crisis when the media and public opinion reflected broad unhappiness and growing suspicion of existing financial institutions and products. Is there still a desire to completely deconstruct financial services and rebuild them from the ground up ten years later, with no immediate threat of a repeat? Of course, the past crisis was utterly unforeseeable. Global events may spark change, but until then, many people may find blockchain challenging to accept.
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4. Blockchains can be slow and inconvenient to use
Blockchain transactions can take a long time to process because of their complexity and encrypted, distributed nature, especially with “conventional” payment systems. Because Bitcoin transactions take several hours to complete, there are inherent challenges with the idea of using them to pay for a cup of coffee during your lunch break unless the vendor is prepared to take a risk. And wasn’t it something that blockchains’ “trustless” feature was supposed to take care of?
The notion, in theory, applies to blockchain networks that are used for purposes other than storing currency, such as logging transactions or interactions in an IoT setting. As the number of computers accessing and writing to the network rises, these chains – which are essentially simply computer files – have the potential to become cumbersome and unwieldy. Hopefully, with developments in engineering and processing speeds, this blockchain issue will be solved, but for the time being, it remains a problem.
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5. The “Establishment” has a financial stake in blockchain’s failure
Let’s be honest: despite the conventional financial industry’s strong interest in blockchain technology, the subtext of much of what is stated about it is “it would probably be best if it just quietly disappeared.”
Banks benefit handsomely from their role as middlemen, and because the cost is shared among their millions of clients, end consumers typically pay very little individually. In 2015, a former Barclays executive branded the sector’s interest and seeming enthusiasm as “cynical,” claiming that it derives from a desire to exert control over or even restrict the nascent technology’s utility.
Banks have a lot of clouts when it comes to lobbying governments and legislators. It’s possible that, if they decide it’s in their best interests, the current financial services industry may drastically diminish the utility and availability of blockchain, if not outright kill it.